President deflects inflation and interest rate questions at PWC conference

President Nikos Christodoulides on Friday deflected media questions about the inflation and higher interest rates saying the government had a fiscal responsibility to safeguard the viability of the economy so that the financial crisis of the past would not be repeated.

The president was speaking on the sidelines of the PWC conference in Limassol where he gave an upbeat keynote address to the business community.

In statements to journalists after being asked to comment on the price of goods and services, and the latest interest-rate hike by the European Central Bank on Thursday, Christodoulides said while the government and he personally were “particularly sensitive” to these issues “at the same time I also have the responsibility, and as a government, we have the responsibility of the correct management of the economy”.

“When you are either in the opposition or you are not in a position where you have to manage such data every day, you can very easily announce measures… [you would like to see],” he said.

“We have already taken concrete measures, and we evaluate the data as they are formed daily but we have a responsibility to look ahead to see how things develop after three months and six months,” he added.

Christodoulides said he was not “a devotee” of horizontal measures but of more targeted measures “for those of our compatriots who face problems because we must admit that there are some who face more problems. We are particularly sensitive to the issue, and we monitor and evaluate it daily.”

Even while he will be in New York to attend the UN General Assembly next week, Christodoulides said he would be in constant contact with Cyprus on economic issues. While in the US he would be meeting with energy and investment organisations, and did not rule out announcements being made, he added.

To a comment that the subsidy for electricity was stopped in the summer while fuel prices continue to rise, the president said: “We have seen in the very recent past in this country, where the mismanagement of finances led us and I don’t think anyone, not even the parties, and even more so, the Cypriot people, because I am accountable to the Cypriot people, do not want us to return to the kind of conditions that led us to wrong economic policies,” Christodoulides said.

In his address to the PWC conference, the president pointed out that the entire global economy was itself in a state of turmoil with inflationary pressures are squeezing household budgets and eroding their purchasing power.

High interest rates added further strain, making borrowing more expensive while hampering economic growth, he said, while geopolitical tensions were casting a shadow of uncertainty over international trade and cooperation, impacting global supply chains and investment.

Navigating this complex landscape requires strategic orientation, robust public finances and smart policy decisions, he added.

His government had a three-pillar approach that would increase competitiveness. These were fiscal discipline, a stable and healthy banking sector and continuous structural reforms.

According to macroeconomic scenarios, the prospects of the Cypriot economy remain positive in the medium term, despite the significant degree of uncertainty. The growth rate for 2024 is projected to be around 2.9 per cent.

While this represents a weaker growth compared with previous years – in line with the weaker growth momentum of the EU – it is well above the EU average, which is projected to stand at 1.4 per cent. For the years 2025 and 2026, GDP growth at around 3 per cent is expected.

Inflation, he said, was continuing its downward trend, expected at 2.5 per cent for 2024, and at 2.0 per cent for the years 2025 and 2026, whilst unemployment was expected at 5.8 per cent in 2024, and to decrease to 5.0 per cent by 2026. Over the medium term, the fiscal position is projected to remain in surplus, resulting to the further reduction of public debt to around 60 per cent in 2026.

“At the end of this month, we will be submitting our first national budget to the House of Representatives, a budget with a healthy fiscal surplus, reflecting our commitment to fiscal discipline and sound public finances, including a number of reform and actions derived straight from our governance programme,” Christodoulides said.

“This first budget will mark the beginning of the unfolding of our government’s strategic orientation for the five-year term, based on a set of ambitious but realistic priorities that will guide our actions by 2028.”

The first such priorities were the swift and effective resolution of chronic issues that concern the citizenry, most importantly migration, affordable housing, road congestion. After that will come tax reform and the continued modernising of the Cypriot state including fighting corruption

The fourth priority is green transition, fully compliant with European obligations. The overarching aim of this initiative is to ensure that all households will have access to low-cost clean energy.

There is also a focus on education and health.

Overall, the president talked about a rebranding of Cyprus “which is indispensable to enhancing our country’s appeal to investors and professionals, as it can significantly influence perceptions and decisions, and create a compelling narrative that resonates with international audiences”.

This will also safeguard the reputation of Cyprus as a credible centre for financial and professional services,” he added.

we are working on a comprehensive and coherent brand for Cyprus, showcasing Cyprus as a reliable, forward-thinking, and attractive destination for diverse opportunities and experiences.

In this respect earlier this week, Christodoulides said he had “a very inspirational meeting” with Blair Sheppard, a global leader in in strategy and leadership, and he has agreed to work with the government “to create a new narrative for Cyprus”.